It has been about a month since the last earnings report for Kohl's (KSS). Shares have added about 0.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Kohl's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Kohl's Q2 Earnings & Sales Beat Estimates, Guides Up
Kohl's posted second-quarter fiscal 2018 results, wherein quarterly earnings of $1.76 per share beat the Zacks Consensus Estimate of $1.65 and soared 42% on a year-over-year basis. The uptick came on the back of higher sales, enhanced gross margin and lower interest expense.
Management highlighted that both store and digital channels showcased strength, while proprietary and national brands also portrayed sturdy performance. The company's Men's and Women's apparel businesses along with Footwear witnessed strength.
Sales and Margins
Total revenue came in at $4,570 million, up 4% from the prior-year period and also came ahead of the Zacks Consensus Estimate of $4,446 million. Net sales jumped 3.9% to $4,310 million, while other revenue increased to $260 million from $248 million in the year-ago quarter.
Further, comparable store sales (comps) rose 3.1% against a 0.4% dip recorded in the year-ago quarter. Well, comps have been positive since the past four quarters.
Moving on, gross margin expanded 42 basis points (bps) to 39.5% in the reported quarter. Gross margin improved on account of sustained inventory management. Further operating income came in at $452 million, up 11.1% from the prior-year quarter's level.
Other Financial Details
Kohl's ended the quarter with cash and cash equivalents of $1,066 million, long-term debt of $2,273 million and shareholders' equity of $5,487 million. The company generated net cash flow of $1,047 million from operating activities during the first six months of fiscal 2018.
Well, such upbeat results boosted the company's bottom-line expectations for fiscal 2018. Management now expects adjusted earnings in the band of $5.15-$5.55 per share up from the prior guidance of $5.05-$5.50. Including loss on extinguishment of debt, earnings are envisioned in the range of $4.96-$5.36 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Kohl's has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kohl's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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